Paulson: Voluntary Subprime Deal by Next Week

ABC has an interview out with Treasury Secretary Henry Paulson wherein he says that he thinks a deal to help subprime borrowers should be finalized soon, ideally by next week.

More color:

“This is not a government subsidy that we’re talking about here,” said Paulson. “This is something that the industry will do where it makes sense.”

The plan would establish guidelines for lenders to freeze payments for homeowners who qualify for the program. Paulson said the program would be completely voluntary, and only some borrowers would qualify.

He said homeowners who can handle an increase in payments and those who don’t “have the financial capability to own a home” will not be offered an interest-rate “freeze.”

“We’re focused on those in the center — the middle group — that are going to have a problem meeting their payment, but it’s in the industry’s interest to come up with a solution to help them stay in their homes.”

Between the government and Citadel being here to help, I think I’d take Citadel. But that’s just me.

More seriously, how the hell are they going to make this work? What is the earnings/assets cut-off? What do you do with people on the edge? What happens in the event of job loss? For long are you rate-grandfathered? What about liability protection for banks that no longer hold the syndicated loans and may now be sued by unhappy rate-starved investors? Questions, questions.